We came across a bullish thesis on Consolidated Water Co. Ltd. (CWCO) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on CWCO. Consolidated Water Co. Ltd. (CWCO)’s share was trading at $23.17 as of May 2nd. CWCO’s trailing and forward P/E were 20.69 and 26.32 respectively according to Yahoo Finance.
An aerial view of a water treatment plant, emphasizing the use of reverse osmosis technology.
Consolidated Water Co. (CWCO) represents a rare case of a high-multiple, high-quality business operating in one of the most beloved niches of socially responsible investing: water. In contrast to sectors like coal or tobacco, where investor aversion leads to low multiples but high yields, water companies like CWCO often command premium valuations due to their environmental appeal. Historically, CWCO has traded between 2.3x and 3.0x sales, with its current multiple sitting at 2.75x—neither overly cheap nor excessively rich, but in the context of 26% annual revenue growth since 2021, potentially poised for a re-rating. While the multiple may compress further in the short term, long-term investors stand to gain significantly if CWCO rebounds toward the upper end of its valuation range. A return to 3.0x sales alongside continued growth could translate to 30%+ upside by mid-2026. For those willing to “catch a falling knife,” today’s price may offer a strong entry point, while more patient investors could wait for a pullback closer to 2.35x sales. Given that scenario isn’t guaranteed, a placeholder position now may be prudent, providing exposure if the market rebounds and allowing room to add on weakness.
The company’s fundamentals are sound and expanding. CWCO specializes in designing, building, operating, and maintaining desalination and water treatment plants using reverse osmosis—a widely known but proven technology. Though revenues can be lumpy due to large, episodic contracts, once a facility is built, it becomes a long-term revenue stream, often lasting two to three decades. Recurring revenue has already doubled from $14.2 million in 2022 to $29.3 million in 2024, and the project pipeline supports further growth. A significant new project in Oahu, Hawaii is scheduled for 2026–2027, expected to generate $149 million in buildout revenue alone. While this introduces some execution risk—$75 million of future revenue tied to one project—the potential upside is substantial, especially as Oahu would add another long-term revenue stream post-construction. Other growth vectors include two new plants under construction in The Bahamas and potential U.S. expansion following a recent Colorado acquisition.
CWCO has a fortress balance sheet for a small-cap, with no debt and $135 million in net cash and receivables against a $370 million market cap. This financial strength allows CWCO to pursue inorganic growth at attractive valuations. Unlike sectors where high multiples preclude capital reinvestment, CWCO can buy new revenues more cheaply than the market currently values its own. While the stock could fall further amid tariff-related market weakness or delays in new project approvals, several catalysts—new contract wins, acquisitions, and a return to favorable multiples—could drive shares from $23.17 today to $37.85 by mid-2027, offering a compelling risk/reward profile.
Consolidated Water Co. Ltd. (CWCO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 12 hedge fund portfolios held CWCO at the end of the fourth quarter which was 6 in the previous quarter. While we acknowledge the risk and potential of CWCO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CWCO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.